Australian home prices have clocked the fastest month of growth since May 2024, as a drop in building approvals clouds the outlook for housing affordability.
The 0.7 per cent rise in August marks the seventh consecutive month of growth and lifts the annual change in dwelling values to 4.1 per cent, according to Cotality’s home value index.
Nationally, prospective homebuyers must now fork out a record $848,858 for a median dwelling.
The property analytics firm says the cycle has been gradually building since a rate cut in February, with demand spurred by a lift in borrowing capacity, wages growth, confidence and urgency as advertised stock levels remain tight.
“Once again we are seeing a clear mismatch between available supply and demonstrated demand placing upwards pressure on values,” Cotality director Tim Lawless said.
“The annual trend in estimated home sales is up two per cent on last year and tracking almost four per cent above the previous five-year average.”
At the same time, advertised supply levels remain about 20 per cent below what is considered average for this time of year.
Dwelling approvals slumped 8.2 per cent in July, the Australian Bureau of Statistics reported on Monday, reflecting some reversion to the mean after a sharp 12.2 per cent jump the month prior.
Despite recent volatility in housing consents, the trend is clearly in an upswing.
Timothy Hibbert, head of property and building forecasting for Oxford Economics Australia, expects commencements to approach 200,000 in 2026.
That would still be 40,000 homes short of the rate required to meet the National Housing Accord target of 1.2 million new homes over five years.
“We expect the late decade apartment upturn will be different to the last,” Mr Hibbert said.
“The accumulation of rezoning, planning concessions, institutional investment incentives and social housing renewal will play a defining role.”
The Property Council’s policy and advocacy executive Matthew Kandelaars said progress was being made but the numbers showed the supply pipeline remained constrained.
“A mix of elevated construction costs, shortages of labour, complex approval processes, punitive state taxes and low productivity on construction sites is putting strain on the industry’s ability to deliver housing,” he said.
Mr Lawless says vendors are in a strong position as spring gets under way.
Auction clearances climbed to a 20-month peak of 70 per cent in August and competition among sellers is comparatively mild.
“We are starting to see the usual start of spring upswing in new listings coming to market but from a low base,” he said.
“A pick up in the flow of stock … will be good news for buyers who generally have limited choice at the moment.”
AMP chief economist Shane Oliver expects home prices to rise about seven per cent this year, but could grow as fast as 10 per cent in 2026 as interest rate cuts and government support for first home buyers drive demand.
“Some more gradual RBA rate cuts, real wages growth, the ongoing housing shortage and more support for first home buyers from October are expected to drive further gains in average prices this year,” Dr Oliver said.
“Poor affordability, rates remaining relatively high compared to the 2021 low and slowing population growth will act as constraints though.”
Cotality found nearly every Australian region recorded a rise in values over the month, with Tasmania’s drop of 0.2 per cent the exception.
Mid-sized capitals continue to lead the way, with August’s highest gains reached by Brisbane at 1.2 per cent and Perth at 1.1 per cent.
Adelaide wasn’t far behind with a 0.9 per cent lift in August, while Sydney came in at 0.8 per cent and Melbourne 0.3 per cent.
Housing Minister Clare O’Neil said the government was delivering on its agenda to boost supply.
More than 5000 social and affordable homes had been completed with the help of Commonwealth funding since the Albanese government was first elected, she said.